A.O. Smith expecting ‘flat-to-down’ residential unit volume in 2026

Water heater giant A.O. Smith on Thursday reported its fourth-quarter and full-year 2025 earnings.

What’s happening: “North America water heater sales increased 1% [year-over-year] in 2025,” CEO Stephen Shafer said on the company’s earnings call, “as cost and tariff-related pricing benefits and higher commercial volumes offset lower wholesale residential volume.” 

• “We project that full-year 2025 residential industry unit volumes were roughly flat to 2024, and the commercial water heater industry volumes increased approximately 5%,” he added. 

Zoom in: The residential business is facing pressure from a slowdown in new construction, according to Shafer, as well as “continued initiatives by retailers to expand into serving the professional.”

• Yes, but: Both the emergency and proactive replacement segments are “very resilient” and “very reliable,” so “we’re expecting that to continue,” he noted. 
• Meanwhile, the company’s boiler sales grew eight percent year-over-year in 2025, partly driven by volume growth in commercial and residential. 

What we’re watching: Against the mixed backdrop, “We project that 2026 U.S. residential industry unit volumes will be flat-to-down compared to 2025,” Shafer said. 

• A.O. Smith plans to share three updated outlooks this quarter, at conferences in February and March.